Invensys poised to launch £500m rights issue to relieve debt crisis

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The Independent Online

Speculation Grew in the City yesterday that Invensys, the engineering group, is poised to announce a rights issue of up to £500m.

The company needs to make a £515m debt payment in June but its disposal programme so far has not been able to raise enough money.

Invensys shares closed up 9 per cent at 22p yesterday as traders bet that the fund raising, rumoured for the past two weeks, was now imminent. The move would relieve pressure on the balance sheet and prevent the company having to make fire-sales of assets. Total debt is some £1.6bn and a complete refinancing is due next year.

The engineering group, headed by Rick Haythornthwaite, warned in November with its interim results that it may not be able to rely on its £1.8bn disposal programme for the money needed to meet debt obligations and plug a £700m hole in its pension scheme.

"The board, as a prudent measure, has decided to explore a range of alternative financing routes in the banking and capital markets, as well as that of additional disposals," the company then said.

Since announcing the disposal plan in April last year, the only significant divestment has been metering systems, which was sold for £390m. There are six businesses on the block, including three large divisions: climate controls; power-ware; and appliance controls.

Invensys declined to comment yesterday. Market sources suggested the rights issue could be announced as soon as next week. An extraordinary general meeting would need to be called to get shareholder approval for the move.

Last year's sale of the metering business brought disappointment. The sale of the North Carolina-based service brought far less than expected by the City - some had said it was worth £600m. The company now needs another major sale but it is believed it does not want to be rushed into more divestments at poor prices.

In November last year, Mr Haythornthwaite had said: "There are plenty of buyers out there and plenty of money but buyers are cagier than in the first batch of disposals. They are more wary of restructuring costs."

Last year, the company sold its software unit Baan for £83m, having paid £470m for the business at the height of the technology boom. The company has been through large-scale restructuring to shrink the business and pay down debt. In 2001 and 2002, the company also executed a £1.8bn disposal programme.

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